PROG Holdings (NYSE:PRG) reported first-quarter financial results on Wednesday. The transcript from the company’s first-quarter earnings call has been provided below.
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The full earnings call is available at https://edge.media-server.com/mmc/p/jzvx4mf6
Summary
PROG Holdings Inc reported strong Q1 results with revenues of $743 million and a year-over-year growth of 11%. The company exceeded its outlook for earnings and non-GAAP EPS.
The company witnessed a 54% growth in consolidated GMV, primarily driven by purchasing power and the strong performance of 4, which grew GMV by 134% year-over-year.
Strategic initiatives include focusing on growth, enhancing customer experiences through AI, and expanding product offerings. The company continues to prioritize deleveraging and maintains a net leverage ratio of 2 times.
Future outlook is positive with revised revenue guidance for 2026 set between $3 to $3.1 billion. The company expects continued growth in GMV and improving profitability across its segments.
Management highlighted the resilience of their customer base amid macroeconomic challenges and emphasized their ability to adapt quickly to changing conditions.
Full Transcript
OPERATOR
Good day and thank you for standing by. Welcome to the PROG Holdings Inc Q1 earnings conference call. At this time, all participants are in listen only mode. After the speaker’s presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question an automated message advising your hand is raised to withdraw your question. Please press star 11 again. Please be advised that today’s conference is being recorded. I would like to hand the conference over to your first speaker today, John Ball, Vice President of Investment Relations. Please go ahead.
John Ball (Vice President of Investment Relations)
Thank you and good morning everyone. Welcome to The PROG Holdings Inc first quarter 2026 earnings call. Joining me this morning are Steve Michaels, Prague Holdings President and Chief Executive Officer, and Brian Garner, our Chief Financial Officer. Many of you have already seen a copy of our earnings release issued this morning which is available on our investor relations website, investor.pragueholdings.com during this call, certain statements we make will be forward looking, including comments regarding our revised 2026 full year outlook and our outlook for the second quarter of 2026. Listeners are cautioned not to place undue emphasis on forward looking statements we make today, all of which are subject to risks and uncertainties which could cause actual results to differ materially from those contained in the forward looking statements. We undertake no obligation to update any such statements. On today’s call we will be referring to certain non GAAP financial measures, including adjusted EBITDA and non GAAP EPS which have been adjusted for certain items which may affect the comparability of our performance with other companies. These non GAAP measures are detailed in the reconciliation tables included with our earnings release. The Company believes that these non GAAP financial measures provide meaningful insight into the Company’s operational performance and cash flows and provides these measures to investors to help facilitate comparisons of operating results with prior periods and to assist them in understanding the Company’s ongoing operational performance. With that, I would like to turn the call over to Steve Michaels, Prague Holdings President and Chief Executive Officer. Steve thanks John. Good morning everyone and thank you for joining us. I’ll start by saying we delivered a strong first quarter. We are very happy with the start to the year and the momentum we’re seeing in the business. Our results came in at the high end of our revenue outlook and exceeded the top end of our outlook for earnings and non GAAP eps. This outperformance reflects the discipline of our operating model and strong execution across the organization supported by higher than expected GMV with improved economics at FORSS as well as better portfolio yield at Progressive Leasing,, primarily due to lower than expected utilization of 90 day purchase options. In an environment where the geopolitical and macroeconomic situation presents challenges, including from rising gas prices, our model performed as designed. This consistency is a direct result of how we built and manage this business over time. Let me provide some additional color on the quarter before walking through our strategic priorities. As I mentioned in February we have begun framing growth through the Lens of consolidated GMV, which grew 5FORSS% in Q1 compared to the same period last year. These results reflect the addition of purchasing power and the Triple digit growth of FORSS as our portfolio of solutions expands. GMV is generated through multiple products across leasing for and purchasing power, and this consolidated view better reflects the full scale of our platform. It’s a great example of how we are deploying an integrated ecosystem of solutions to better reach underserved individuals and families. Starting with Progressive Leasing, GMV for the first quarter came in at 2.2% below the same period last year. However, trends improved meaningfully as the quarter progressed, with January down high single digits, February down low single digits, and March up low single digits. As a reminder, throughout last year our leasing business faced GMV headwinds from deliberate tightening actions and the bankruptcy of big lots. As we lapped both of those headwinds, particularly through February, Leasing’s GMV trends inflected positively in March. From a GMV standpoint, the quarter played out largely as expected and we are excited to exit the quarter on a growth trajectory. FORSS GMV for The quarter was 13FORSS% higher year over year. Customer demand for our BMPL product remains robust and importantly, we are seeing that growth translate into attractive economics and profitability, which I’ll discuss in more detail shortly. Purchasing Power’s Q1 GMV grew double digits at 10.3% year over year. This growth was due to favorable performance within existing employer accounts. We also added several new employer clients during the quarter, bringing tens of thousands of new eligible employees onto the platform and supporting future growth. Consolidated revenue came in at 7FORSS3 million, representing 11% year over year growth. This performance was primarily as a result of the addition of purchasing power along with growth at FORSS and partially offset by a revenue decline at Progressive Leasing due to a lower portfolio size. Throughout the quarter. Consolidated adjusted EBITDA was 90.3 million and non GAAP EPS was $1.2FORSS, both exceeding the high end of our outlook. This outperformance was fueled by better than expected portfolio yield and customer payment performance at Progressive Leasing as well as increased customer demand and profitability at FORSS. To summarize, the quarter, we delivered results above expectations, saw improving GMV trends while maintaining portfolio health at leasing drove profitable triple digit growth with improving economics at FORSS, achieved double digit GMV growth at purchasing power and continued to execute against our ecosystem strategy. Before we shift into our strategic priorities, I want to briefly address the broader environment and how it informs our updated outlook. The consumer we serve remains resilient, but they are facing real challenges. Gas prices are elevated and there is increased uncertainty in the macro backdrop. We remain committed to continue to deliver consistent portfolio performance across all our businesses and managing costs prudently to achieve our earnings outlook. Our track record demonstrates our ability to adapt quickly and we will do so as conditions evolve. Let me now turn to our three strategic pillars Grow, Enhance and Expand to share some highlights from the quarter. Starting with the Grow pillar, we saw encouraging traction at Progressive Leasing and purchasing power with remarkable growth at FORSS, which collectively resulted in consolidated GMV being up 5FORSS% year over year. For leasing, Q1 applications grew double digits year over year and GMV trends improved sequentially month over month with March up low single digits compared to the prior year. In addition to lapping the tightening actions from early 2025, these results reflect our investments in technology to enhance customer experience and in marketing to promote engagement across both new and existing customers. You heard about many of these initiatives at our recent investor day and we’re pleased to say that they are continuing to have a positive impact on our business. Our long term distribution base of exclusive retail partners with approximately 70% of progressive leasing GMV secured into the 2000 and 30s provides a durable foundation for growth as we also gain balance of share within existing key retail partners. Additionally, our direct consumer efforts spanning both marketing and digital channels have been meaningful drivers of growth within marketing. At Progressive Leasing, we leaned into customer acquisition, partner marketing and cross product campaigns which drove increased engagement and incremental gmv. We focused further up the funnel while maintaining flat acquisition costs year over year. At the same time, our outreach channels including email, SMS and push notifications generated incremental gmv, reinforcing healthy consumer demand and improving return on ad spend. On the digital front, Prague Marketplace delivered another notable quarter, growing a 169% year over year. We are scaling this channel through ongoing product enhancements, increased traffic and improved conversion. Our E Commerce channel also grew meaningfully due to deeper integrations with retail partners and improved digital checkout experiences. Q1E Commerce GMV was 25.7% of total progressive leasing GMV up from 16.8% in the same period last year and the highest first quarter mix to date. Shifting to FORSS, we delivered another triple digit growth quarter, our 10th in a row. With performance powered by both customer acquisition and engagement. The team rolled out AI driven product enhancements that simplify the shopping experience and average order values increased year over year. Monthly active users more than doubled compared to a year ago, reflecting growing consumer interest. On the marketing side, spend was deployed efficiently to support growth, maintaining a healthy balance between paid and organic customer acquisition. Finally, purchasing power delivered double digit GMV growth reinforcing the strength of its model and its strategic role within our ecosystem. Its payroll deduction model represents a differentiated distribution moat serving employees who value predictable convenient purchasing options through their paycheck. We remain in the early stages of deeper integration including introducing purchasing power to our retail partner employee basis and leveraging addressable employer relationships to expand leasing distribution over time. We believe this opportunity represents a meaningful incremental growth leverage From a marketing perspective, early media testing at purchasing power is showing encouraging results, demonstrating our ability to improve penetration within the eligible population under the Enhanced pillar, our investments in improving both customer and retailer experiences are progressing with several initiatives beginning to deliver positive results. Our AI driven lease eligibility engine is scaling meaningfully. We’ve expanded our leasing product catalog and improved response times from three seconds down to a tenth of a second. At the same time, we are advancing customer experience enhancements that are driving higher conversion. We deployed multiple AI driven improvements across our marketplace including an AI Chatbot assistant, enhanced payments navigation and a new AI powered checkout flow that simplifies and streamlines the transaction process. These marketplace enhancements have delivered an approximately 20 percentage point improvement in checkout conversion versus the prior experience while also lowering cost to serve and improving operational efficiency. The focus remains clear enhance the customer experience to support higher customer lifetime value while improving the economics of the business. Under the expand pillar, FORSS is scaling and purchasing power is growing double digits in line with expectations. As integration efforts advance, we remain intensely focused on strengthening our ecosystem. FORSS executed at a high level, delivering 1FORSS2% revenue growth in Q1 2026, the 10th consecutive quarter of triple digit GMV and revenue growth. Q1 GMV reached 280 million more than doubling Q1 2025 and March 2026 GMV of 108 million was the second highest month in company history. Customer engagement trends remain favorable with average purchase frequency of approximately five transactions per quarter and more than 130% growth in active shoppers year over year. New shoppers grew approximately 80% year over year, representing expansion of the platform’s customer base. Four’s subscription model remains a key driver, with Four plus subscribers continuing to contribute approximately 80% of total GMV. Four’s take rate, defined as revenue generated as a percentage of GMV over the trailing twelve month period, remained consistent at approximately 10%, indicating positive monetization efficiency as the business scales. From a profitability standpoint, Ford generated adjusted EBITDA of 12.9 million in Q1 2026, already exceeding full year 2025 adjusted EBITDA of 9.9 million. Q1 adjusted EBITDA margin was 37% reflecting the benefits of scale. While Q1 is seasonally the highest margin quarter following elevated GMV from the holiday period, the business continues to demonstrate meaningful operating leverage MoneyApp, our cash advance product, grew revenue over 50% in the first quarter and continues to play an important role as both an engagement and cross sell driver within our ecosystem. Growth was as a result of higher average advance sizes as well as early traction from a new product we introduced in December called Top Ups, which allows qualifying customers to responsibly access additional funds on top of an existing advance. While still early top Ups are beginning to generate incremental revenue and represent another avenue for us to deepen customer engagement and expand the platform over time, our ecosystem strategy is gaining traction. At our investor day in March, I highlighted that cross product engagement is a strategic priority because we believe it is a key component of long term growth and value creation. We are seeing progress from our ecosystem first approach with customers increasingly engaging across multiple products, driving higher lifetime value and improved acquisition efficiency. Four is currently our most connected product, often serving as an entry point and engagement driver across our platform. Progressive Leasing showed the most meaningful improvement in cross product engagement during the quarter, with more of its customers interacting with other offerings. Notably, we also drove the largest overlap and fastest growth in overlap between Progressive Leasing and four customers. Before turning over to Brian, let me touch on capital allocation. Our priorities remain unchanged. Invest in the business, pursue strategic M and A and return excess capital to shareholders through share repurchases and dividends. In February I told you that in the near term we will focus on prioritizing debt reduction as we work toward our long term net leverage target of 1.5 to 2 times. And we did. During the quarter we paid down $210 million in recourse debt, ending Q1 with a net leverage ratio of two times. To summarize the quarter, we delivered results above expectations led by consistent execution and improving demand trends across the business. Importantly, these results were achieved while continuing to invest in our strategic priorities, advancing our direct consumer capabilities, scaling our digital channels and deepening integration across our platform. Overall, our distribution moat, diversified ecosystem and data driven decisioning capabilities position us well to perform across a range of environments. I firmly believe the best chapters of Prague’s story are still ahead of us. With that, I’ll turn the call over to Brian. Brian
Brian Garner (Chief Financial Officer)
Thanks Steve and good morning, everyone. Our strong performance in the first quarter was broad based and reflects disciplined execution across each of our businesses as well as some margin favorability from consumer behavior in the leasing segment. In a short period of time, we made significant progress against our goal of deleveraging following the purchasing power acquisition and as we exit the quarter we are within our target net leverage range of 1.5 to 2 times. I’ll begin with our Q1 results of progressive leasing followed by four technologies purchasing power and then move to consolidated results. I’ll close with an update on our balance sheet capital allocation and our Revised full year 2026 outlook. While more broadly consumer demand across several discretionary categories remains pressured, our teams executed well on the areas within our control, including targeted growth initiatives, decisioning, expense discipline and capital deployment, enabling us to deliver results ahead of expectations and reinforcing the underlying opportunities within the business. Starting with Progressive Leasing first quarter, GMV came in at 393 million, representing a 2.2% decline year over year, which was in line with our expectations. As Steve outlined, this performance reflects two primary factors in the first half of the quarter, the tightening actions we implemented last year to preserve portfolio performance and the lapping of remaining GMV from big lots following their bankruptcy. As we progressed through the quarter and moved past these headwinds, GMV trends improved sequentially, returning to low single digit growth in March. Revenue for the Progressive leasing segment was 597 million in the first quarter, down 8.4% year over year, primarily result of a smaller average lease portfolio throughout the quarter. The lower gross leased asset balance, which is down 9.4% entering …
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